KYC is an acronym for “Know Your Customer” and is a term used for Customer Identification Process as a part of Account Opening process with any financial entity. KYC establishes an investor’s identity & address through relevant supporting documents such as prescribed photo id (e.g., PAN card) and address proof and In-Person Verification (IPV). KYC compliance is mandatory under the Prevention of Money Laundering Act, 2002 and Rules framed there under, read with the SEBI Master Circular on Anti Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries.A standard Account Opening form (AOF) is generally divided in 2 parts:Part I contains the basic and uniform KYC details of the investor as prescribed by the Central KYC registry (Uniform KYC) to be used by all registered financial intermediaries and Part II additional KYC information as may be sought separately by the financial intermediary such as a mutual fund, stock broker, depository participant opening the investor’s account (Additional KYC).

Central KYC Registry (CKYCR) is a centralized repository of KYC records of customers in the financial sector through an entity substantially owned and controlled by Central Government to receive, store and safeguard the KYC records of a client in digital form. This is to implement uniform KYC norms and inter-usability of the KYC records across entities in the financial sector with an objective to reduce the burden of producing KYC documents and getting those verified every time when the customer creates a new relationship with a entity.Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the Central KYC Registry.

Uniform KYC has been prescribed in order to bring uniformity in KYC process and eliminate the requirement for investors to undergo the KYC process multiple times when opening accounts with different financial intermediaries like mutual funds, stock brokers, depository participants etc. The CKYCR has prescribed uniform KYC guidelines and a standard KYC form and the supporting documents to be obtained by all registered financial intermediaries. Financial intermediaries shall use this standard KYC form as Part I of their Account Opening Form. The financial intermediary, as part of their account opening process, shall upload the KYC information contained in Part I and documents with CKYCR.Thus, an investor has to undergo a Uniform KYC process only once and the KYC details are shared by the CKYCR with other financial intermediaries with whom the investor may open accounts subsequently. However, any changes in the KYC information provided earlier need to be updated with any of the intermediaries with whom the investor is maintaining an account.

In case of investments in respect of a minor, the Parent/Legal Guardian who opens the account on for the minor needs to complete the KYC process.

When a minor becomes a major on attaining 18 years of age, she/he has to undergo and complete KYC process in his/her own capacity and notify each of the concerned Mutual Funds/Financial Intermediaries by filling up a prescribed ‘Minor Attaining Majority form’ in order to be able to transact further in his/her folios/accounts.

“FATCA” or Foreign Account Tax Compliance Act is a United States (US) law aimed at prevention of tax evasion by US citizens and residents (“US Persons”) through use of offshore accounts. FATCA obligates foreign financial institutions (FFIs), including Indian financial institutions to provide the US Internal Revenue Service (IRS) with information on the accounts of to report accounts held by specified US Persons. Since domestic laws of sovereign countries, including India, may not permit sharing of confidential client information by FFIs directly with US IRS, the U.S. has entered into Inter-Governmental Agreement (IGA) with various countries.The IGA between India and USA was signed on 9th July, 2015, which provides that the Indian FIs will provide the necessary information to Indian tax authorities, which will then be transmitted to USA automatically. The IGA between India and USA has become operational effective August 31, 2015.The impact of FATCA is relevant not only at the point of ‘on-boarding’ of investors, but also throughout the life cycle of the investor account or folio. Any event which impacts customer tax status or change of key information may trigger impact under FATCA. Further, FATCA due diligence is to be directed at each investor (including joint investor). Once a given investor is identified as a reportable person/ specified US person, all his folios will have to be reported – including those where he may be a joint holder. Notably, in case of folios with joint investors, the entire account value of the investment portfolio will be attributable under each such reportable person.

FATCA obligates every Indian financial institutions/mutual funds to provide required tax related information to Indian Tax authorities of accounts held by specified US Persons. Therefore when you open a new account with mutual fund you need to provide information regarding your tax status. In case you are not a tax resident of any other country outside India, you will have to submit a declaration confirming the same.

Yes, every customer who opens a new account with any mutual fund is required to give FATCA/CRS self-certification. For your convenience both these have been merged into one and you need to provide one set of information which will suffice for FATCA as well as CRS. If a self-certification is not provided by an account holder or the reasonableness of a self-certification cannot be confirmed, the account is treated as reportable to the Indian tax authorities, who in turn are obligated to pass on the information to the tax authorities in the respective US/G20/OECD countries.

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